A Blundering Bad Guy in Vermont and Other EB-5 Notes

By David North on May 13, 2016

Multiple EB-5 developments — all discouraging for the program's backers — are coming hard and fast as the September 30 termination of the main part of the program looms.

Quiros Plays into the Hands of EB-5's Opponents. Perhaps the biggest blow of all came from Ariel Quiros, the Miami developer who is the leading villain in the Vermont EB-5 scandals, according to the Securities and Exchange Commission, as we have noted. Instead of staying away from the press — as his more-or-less opposite number, Joop Bollen in South Dakota, has done for years — soon after his bank deposits were frozen Quiros filed court papers asking that $100,000 a month (or $1.2 million a year) be unfrozen for his living expenses, as well as $300,000 for his lawyers. It is not clear in the otherwise useful VTDigger news account whether the $300,000 for the lawyers was a one-time or a monthly charge.

This led, not unexpectedly, to the SEC lawyers replying that the EB-5 investors' funds should not be used to support Quiros' luxurious lifestyle as well as his "army" of lawyers. The judge gave him $41,000 a month for living expenses, a hardship that a lot of people would welcome.

Vermont Pols Pile On. Meanwhile, Vermont politicians in both parties are busily using the scandal in their campaigns for state-wide office.

Scott Milne, who describes himself as a likely GOP candidate for the U.S. Senate against the long-serving Pat Leahy (D), former chair of the Senate Judiciary Committee, has asked that his potential opponent release all of his EB-5-related letters and email messages and has accused him of "traveling the globe to help recruit investors into this alleged Ponzi scheme."

On the other side of the aisle, former Ambassador Peter Galbraith, a candidate for the Democratic nomination to succeed retiring Governor Peter Shumlin (D), has raised a similar set of issues, as we reported earlier.

Another (Small-Scale) Indictment in South Dakota. While my assessment is that the loss/theft/disappearance of EB-5 funds probably involves twice as much money in South Dakota as it does in Vermont, the situation there has never been as clear-cut as it is in Vermont, where there is a specific sum of money missing ($50 million) and both federal and state authorities agree that it is gone, and both accuse a specific person of absconding with the funds. In South Dakota, where the facts are more complex, the political establishment has not shown the willingness we see in Vermont's government to get to the bottom of the case.

Nevertheless, the former director of the South Dakota state EB-5 regional center, Joop Bollen, has now been indicted, for a second time, for mis-managing another sum of about $1 million. This can only be the tip of the iceberg.

EB-5 Reform May Cause Spike in Applications. Grace Li, a lawyer specializing in EB-5 matters, has written to me to regarding what only can be an ironic development. One of the likely outcomes of the effort to extend the main part of the EB-5 program beyond its statutory sunset of September 30 — if the program, in fact, is renewed — would be an increase in the minimum investment that produces a set of green card, from the current $500,000 to $800,000.

Most of those interested in either changing or not changing the EB-5 program agree that the current number is too low.

The prospect of an increase in price has caused some Chinese websites to urge immediate participation in the program while the minimum investment is still at the current level; some of the messages in Mandarin, she told me, were misleading, to say the least.

A few years ago, USCIS announced, well ahead of time, that it was raising the fee for naturalization; there was an immediate spike in applications. The same thing may happen with the EB-5 program despite its bad press in the United States.